Housing construction picks up

AUSTRALIA'S housing construction sector appears to be finally picking up but economists and industry groups warn further interest rate cuts may be needed to ensure the nascent recovery gathers steam.

The number of residential building approvals rose 2.9 per cent in November, the Australian Bureau of Statistics said on Thursday.

UBS senior economist George Tharenou said the figures suggested a modest recovery was underway in the housing sector, though he said almost all of the growth had been in approvals for multi-unit properties.

He said the figures suggested a series of interest rate cuts from the Reserve Bank of Australia over the past year was helping to stimulate growth in the sector.

The RBA has cut the cash rate, currently at 3.0 per cent, by 1.75 percentage points since November 2011.

"To us it shows an uptrend since the RBA started cutting interest rates," Mr Tharenou said.

"But it does show a shift in household patterns to high-density living, which is the more affordable end of the market," he said.

Construction approvals for multi-unit properties rose 10.1 per cent in November, while approvals for houses fell 0.3 per cent.

But National Australia Bank chief economist Rob Henderson said the housing figures weren't as positive as they first appeared, with a fall in the value of buildings approved.

Mr Henderson said the value of residential buildings approved in the month rose 2.7 per cent, after falling 11.4 per cent in October, while the value of non-residential building approved fell 14.4 per cent.

"It's hard to paint a positive picture out of these figures," he said.

He said the RBA may have to cut interest rates again this year to provide a greater boost to the sector.

"You'd want to see an apparent turnaround for construction before too long, otherwise it suggests more interest rate cuts are needed to stimulate the economy."

"The danger is that the recovery could run out of steam as the impact of previous interest rate cuts appear to have failed in lifting new homebuyer confidence and underpinning a sustained housing recovery," he said.

"Authorities are banking on a strong revival in residential building as the economy loses mining as its key driver. For this to eventuate, the Reserve Bank should cut interest rates at the next board meeting in February," Mr Jones said.

The ABS figures showed the growth in building approvals was centred around Victoria, which saw an 8.7 per cent rise during November.

All of the other states recorded a fall in approvals, with South Australia, down 13.9 per cent and Tasmania, down 7.7 per cent, the worst performers.